December 21, 2010

IRA Charitable Rollover Included in Final Tax Bill

Included in the Middle Class Tax Relief Act of 2010 signed by President Obama earlier this week is the provision for the IRA (Individual Retirement Account) Charitable Rollover.

The new law allows donors age 70½ to exclude from their taxable income any IRA funds up to $100,000 that have been withdrawn and transferred to a charity when filing a tax return. The IRA Charitable Rollover expired at the end of 2009 and had been in effect since 2006.

The extension also is retroactive, meaning that the tax benefits of the provision apply to any qualified donations made after Dec. 31, 2009. The extension of the IRA Charitable Rollover also includes a special provision that allows taxpayers who make any qualified donations between Dec. 31, 2010, and Feb. 1, 2011, to deem that those donations were made on Dec. 31, 2010, for tax filing purposes, according to Paulette V. Maehara, CFRE, CAE, president and CEO of the Association of Fundraising Professionals (AFP) in Alexandria, Va.

The provision is extended through Dec. 31, 2011

“Tax incentives such as the IRA Charitable Rollover provision play a vital role in encouraging donors to make gifts, especially as the contribution amounts become larger,” said Maehara. “The rollover provision is a powerful and unique way that donors can make support charitable causes in their communities.”

AFP will be working with members of Congress to remove the $100,000 cap on gifts from IRAs and lower the age threshold for all such gifts from 70½ to 59½. “The IRA Charitable Rollover has worked very successfully over the last few years, but it could be enhanced to encourage additional giving,” added Maehara. “We believe the provision’s impact could reach billions of dollars annually once the public becomes more familiar with it.”